January 2023
Employment Tax
Summary
In this update we discuss changes coming into force in 2023 including how the tax reduction is processed, not collecting advance payments during the year, changing the method of taxation of income from private rental, as well as the PIT- 2 form.
Tax Reduction Amount – taken into account by 3 payers
To date, employees have only been allowed to elect one employer as being authorised to deduct the amount reducing the tax from their PIT advances. From 2023, taxpayers may indicate in the PIT-2 form up to three payers who are to apply the amount reducing the tax. If we have one employer, 1/12 of the tax reduction amount (PLN 300) applies, if there are two – 1/24 of the tax reduction amount (PLN 150), and if there are three – 1/36 of the tax reduction amount (PLN 100).
In addition, contractors hired under a contract of mandate, a contract for specific work, or by persons on managerial contracts will now be eligible for having their tax advances reduced.
Resignation from the payer’s inclusion of tax deductible costs
From 2023, employees can have their employer remove monthly flat-rate employee deductible costs. Such employee costs are deductible on a taxable person’s income from one public service relationship, employment relationship, cooperative employment relationship, or from outwork, in which case the costs amount to PLN 250 per month; if the taxable person’s place of permanent or temporary residence is located outside of the town where they work and the person does not receive a separation allowance, the monthly deductible costs amount to PLN 300. Previously, employees with more than one employer could have the costs deducted by each of them, however they are only allowed to have the costs deducted by one employer. As a result, many employees were required to pay tax surcharges when filing their annual tax returns. Now, deduction by more than one employer can be opted out of.
No tax advances during the year
A taxable person may request in the new PIT-2 that advances on his or her income tax not be collected. If the requesting person does not exceed the PLN 30 000 ceiling during the year, the payer will not withhold tax advances on his or her income until the end of the year. However, if the income exceeds PLN 30 000, the payer will be obliged to withhold advance tax on the amount in excess of PLN 30 000 without applying the statutory tax-free amount.
Statements and applications of taxpayers covered by the new PIT-2 form
The new template of the PIT-2 document for 2023 takes into account the changes mentioned above. It combines all statements and applications that may affect the amount of tax advances, and thus – the amount of net remuneration.
In order to get the most out of it, an employee should file a PIT-2 form at the beginning of the year, so that the employer as the taxpayer applies all the declarations and requests to all monthly salaries paid during the year, starting from the January pay. As a rule, PIT-2 is to be filed in paper form or in another format accepted by the employer as the payer, e.g. via payroll software.
The published PIT-2 form, valid in 2023, include a number of taxpayer’s statements and applications:
⮚ Request for the statutory amount reducing the tax to be applied to monthly advances on income tax,
⮚ Declaration on the intention to take advantage of preferential taxation (jointly with the spouse or as a single parent),
⮚ Declaration on eligibility for increased employee tax deductible costs,
⮚ Declaration on eligibility for specific tax reliefs, i.e. relief for families with 4+ kids, return relief for emigrants, relief for working pensioners,
⮚ Request for the disapplication of a youth relief or employee deductible costs,
⮚ Request for the disapplication of a 50% deduction on earner income,
⮚ Request for the non-deduction of tax advances during the tax year.
It is important that taxpayers are obliged to withdraw or amend the previously submitted declaration or application if the circumstances affecting the calculation of the tax advance have changed. Withdrawal and change of a previously submitted statement or application is made by submitting a new statement or application under the PIT-2 form.
PIT declaration submitted by children
If a person’s own or adopted minor children derive income from disability allowances, it will not be added to the income of their parents from 1 January 2023. This means that such income will be subject to child income tax and may require filing a tax return.
Restrictions related to the relief on monuments
From 2023, the relief for the purchase of historic buildings is curtailed. Expenditure on the purchase of a registered historic building or a share in one will no longer be deductible. Spending on the conservation or restoration of a historic building or construction works in one can be deducted only after such works have been completed. In addition, costs related to a historic building will not be deductible insofar as they go beyond the scope of works set out in the regional conservator’s permit or if they are completed contrary to such a permit.
Benefits for public benefit organizations
By the end of 2022, the amount that can be donated to an NGOs chosen by the taxable person has been 1% of the tax shown in the PIT return. From 2023, it is 1.5%, which means that the option to donate a sum at the above rate will be available in the 2022 PIT return.
Increase in social security contributions
In 2023, the maximum amount of earnings on which the pension and disability insurance contributions are to be paid will increase to PLN 208 050 – based on 30 times the projected average salary (currently PLN 177 660). For someone who earns exactly PLN 208 050, the increase in pension and disability insurance contributions will amount to nearly PLN 3500 per year, while for employers this will be nearly PLN 5000 annually.
The increase in the minimum and average pay in 2023 will also translate into increased social security contributions for entrepreneurs. Those who start their own business will be able to take advantage of preferential social security contributions, the individual components of which will amount to 30 percent of the minimum wage. As a result of the increase in the minimum wage (first in January and then in July 2023), the increase in social security contributions for such people may amount to as much as PLN 600 annually. Those who do not benefit from the preferential treatment, will pay social security contributions amounting to 60 percent of the projected average salary. Given the increase in the average pay, such entrepreneurs will need to contribute even PLN 2500 more annually.
Private rental only on a lump sum basis
Revenue on private property rental will now only be taxable on the basis of a flat rate charged on reported revenues, with the step-tax option and deductible costs no longer available. However, you can still settle the loss on the lease from previous years.
No depreciation of residential premises
From 2023, depreciation is not allowed irrespective of the type of residential premises or building. What is more, when renting their property as individuals, lessors will no longer be allowed to deduct the one-off tax on civil law transactions, notary fees, stamp fees, loan interest, and commissions that have been paid on the purchase or until the handover of the premises or building for use. Instead, the cost of the tax paid will increase the initial value of the purchased property and will be deductible only upon the sale of the property. The same will apply to housing renovation or retrofitting expenses.
Contact:
We encourage you to contact our experts if you have any questions about the new PIT-2 form as well as any other PIT issues.:
• Mariusz Ignatowicz, Partner Director | mariusz.ignatowicz@vialto.com
• Jadwiga Chorązka, Managing Director | jadwiga.chorazka@vialto.com
• Joanna Narkiewicz-Tarłowska, Director | joanna.narkiewicz- tarlowska@vialto.com
• Grzegorz Ogórek, Senior Manager | grzegorz.ogorek@vialto.com
More information about Vialto Partners can be found at this link: www.vialtopartners.com
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